The Fed buys US treasury bonds for $XB, the treasury pays them the money plus interest, and the Fed then does nothing with the money?
That sounds like a way to lower the money supply, which is exactly what I'd expect of a central bank trying to fight inflation.
Not the best idea if the problem with inflation is on the supply side - energy costs and so on, corporations have to find a way to cover these and the easiest way is to raise prices. Reduction of money supply will make fall in demand and those corporations will find it difficult to cover day to day - either they'll have to increase prices even more or go bankrupt.
If they really wanted to fight inflation, they should have looked at easing supply side problems.
The only thing the Fed Reserve can do is move interest rate policy and other indirect-means of controlling M2 money supply.
But since they have to win elections, their incentives are in the opposite direction.
Which is why independent central banks were invented.
Please name the times in the last 30 years where the Fed has hastily raised interest rates.
Lemme help you out: https://fred.stlouisfed.org/series/FEDFUNDS
The majority of the Fed's actions has been to drop interest rates.
> rather than reflexively resorting to the same old monetary tricks.
The Fed can _only_ do monetary tricks. That's all they're authorized to do.
https://www.gzeromedia.com/the-graphic-truth-50-years-of-us-...
> The Fed can _only_ do monetary tricks. That's all they're authorized to do.
When you only have a hammer, everything starts looking like a nail. Not everything can be solved by monetary tricks, but it seems like they just have to do something for the sake of it, regardless if that means tanking the economy. But hey, once economy dies, there will be no inflation! Genius.
You're not posting very much evidence that the Fed often raises interest rates.
Your graph clearly shows the 15%, 17%+ federal funds rate of the 1970s, and the 5% we're at today, and the 0% we spent the last decade at. The error is clearly that we've overcorrected and dropped rates too low.
That’s not the Fed’s choice. The Fed has a mandate to target specific outcomes with a narrow set of monetary policy tools, acting within the existing fiscal framework.
Congress can make whatever fiscal interventions it chooses, whenever it chooses; the Fed doesn’t pass the baton to Congress when it feels monetary policy is inadequate, Congress passes it to the Fed by inadequate fiscal policy to acheive the goals Congress mandates the Fed to intervene to correct towards.
If you think a situation calls for a fiscal response that osn’t happening, you shouldn’y blame the Fed for not passing the baton, you should blame Congress for not acting. Congress isn't subordinate to the Fed.
Clearly the FED doesn't. If the Fed thought it was primarily a supply issue it would be printing money to allow cheap loans and industrial expansion
By all means, let's keep simplifying complex economic phenomena to fit neatly within preferred policy approaches. It's much easier to adjust the monetary supply levers than confront the thorny reality of supply chain bottlenecks and surging commodity costs. After all, those dealing with these realities on a day-to-day basis – the small businesses, the consumers, the workers – they aren't "anyone", are they?
Supply constraints can be pushing prices up, but demand pressure can be pushing prices up MORE.
If you look at your comodity costs, the question is if less of them are being produced than before, or similar numbers are being produced, but competition is willing to pay more for them.
To take a look at something simple like beef, supply keeps going up year over year. Producers in general have a healthy profit margin. However, people are willing to pay more for beef. Would you call this a supply driven problem or a demand problem.
You could do the same for energy costs.